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Short sales to help homeowners avoid foreclosures

March 10, 2011 12:00:00 AM PST
With the housing market continuing to struggle, there's a new campaign to get mortgage lenders to do more to help homeowners avoid foreclosures.

One way to do that would be for lenders to approve more short sales. The California Association of Realtors took out full page advertisements in newspapers up and down the state, asking mortgage lenders to be more open to short sales.

In layman's terms a short sale is when a homeowner who owes more than the home is worth, works out a deal where the mortgage lender agrees to take the loss and allows the home to sell at a lower price.

According to real estate broker Geoff McIntosh, a short sale is the last option a homeowner has before losing their home to foreclosure.

"For many people it's a matter of pride," said McIntosh. "They don't want to lose the house in foreclosure. For others it's more practical. They don't want to do the damage that a foreclosure does to their credit."

In its letter to mortgage lenders, the California Association of Realtors said short sales can help the state's economy by accelerating the pace of home sales and reducing the inventory of bank owned homes

"The process is cumbersome," said McIntosh. "It's long and it's not standardized in any way. And that's what we are really hoping to accomplish."

According to the lenders, it said short sales are complex transactions which often involve multiple parties. The California Bankers Association said often times documents needed to make decisions on short sales are missing.

The C.B.A. added that the industry is doing what it can to move through the large volume of short sales, and the number of short sale transactions is on the rise.

Mr. McIntosh explained the biggest advantage of a short sale is that the homeowner, after a couple of years, can go out and buy a home with minimal damage to his or her credit instead of waiting the seven to ten years after a foreclosure.

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